$20,000 is a lot of money. The truth is, saving an amount like that can seem overwhelming for most people until they learn how to begin manifesting more into their life (to read up on how to do this click here.) If you want to save $20k in a year, you're going to need to have a plan in place to reach your goal. In this post, I'll show you exactly how to save 20000 in one year so you can reach your goal.
Disclosure: This isn't a get-rich-quick article. Develop tenacity and grit, because whether you're saving for the down payment on a new home, saving for your kiddo's college, or you're looking to purchase a new car, saving $20,000 is going to take some patience and dedication.
Looking to save $20k this year? You'll need all the help you can get. Try leveraging automatic savings apps like my favorite, Qapital. While it does cost a monthly subscription (I pay $3/mo), it helps me save more in a shorter period of time by rounding up when I use my card. I love it so much and it is the only money-saving app I use, year after year. Click here to try and get $25.
How Much Do I Need to Save Each Month for 20k a Year?
If you want to save $20,000 in a year, you'll need to save $1,666.67 each month to reach your goal. Does it feel smaller by breaking it into bite-sized nuggets? For me, it always helps to break down a big money goal (like when I paid off $8000 in under 90 days) into monthly or even weekly morsels.
While this can seem impossible at first, by putting together a plan and working towards it, you might be surprised at what you can accomplish.
How Much Do I Need to Save Each Week for 20k a Year?
If you want to start being responsible with your money, with a goal of saving $20,000 in a year, you'll need to save around $384 each week to reach your goal. Below are the best ways to nab $300 extra per week. You can also check out our posts How to Save 1000 in a month and How to save 5000 in 3 months for extra ideas.
Best Ways to Save $20k in One Year
Create a Budget
Whenever it comes to saving money, you always need to have a plan in place – and that's where a budget comes into play. Starting a budget can help you to better understand where your money is going each month so you can adjust your spending and boost your savings. (For reference, Here's our FBL Budgeting Guide and favorite books on budgeting.)
There are several different types of budgets that can help you save money. The best one is the one that works for you.
For some people, a zero-based budget is most effective. For others, a 50/30/20 budget may be more easy to follow.
No matter what type of budget you choose, it's critical to take note of your progress as the weeks and months go by (I like to reco Rocket Mortgage for help tracking your spending against your budget.) This can help you to adjust your finances so you can save more money and reach your goals.
Start an Emergency Fund
Having an emergency fund is another key step in your journey to saving $20000 in a year. An emergency fund is money that is put aside strictly for emergencies and unexpected expenses.
This should not be used for items like car maintenance, home repairs, or other expected expenses you may have forgotten about.
So, how much should your emergency fund be?
Most financial advisors recommend at least 3 to 6 months of your normal monthly expenses. This should include everything from your mortgage/rent, grocery spending, car payments, and everything in between.
You can store your emergency fund in a high-yield savings account so you can earn a little interest while your money sits.
Lower your housing costs
So, one of the best ways to save more is to lower your big-ticket items: like bills, car costs, and housing. By lowering your housing spend, taking on a roommate, or house hacking, you can lower your overall housing costs and bank the difference.
House hacking is a method of real estate investing that has become increasingly popular over the last five years. This is a unique way of living where you buy a property and rent out a portion of it to roommates. (I did it for my first property so I could go full-time with this blog back in 2015.)
Because your fixed expenses are some of the most important when it comes to your financial health, lowering these can be an excellent avenue to help you save money.
Share a Car
Car costs can be expensive, between fuel, insurance, repairs, and routine maintenance – your vehicles can cost you a lot of money.
So, does your family really need multiple vehicles? Do you even need one? (I saved $4,700 living without a car for eighteen months, FYI. The post for that is here.)
If you can share a car with your family this can help you to cut down on some of these expenses so you can save more. Even better, if you can sell a vehicle, this can get you a nice chunk of cash to help you reach your goal.
If you want to take it a step further, if your city has strong public transportation you might be able to ditch the vehicles altogether to save money.
Find Better Insurance Rates
Insurance can be expensive, but shopping around can save you thousands of dollars each year without having to do a ton of work. Between car insurance, homeowners insurance, and other types of insurance, you'll be surprised how easy it is to save money by shopping around online.
Saving money doesn't have to be difficult, it's about finding easy ways you can cut back on things that are costing you more than they should. (P.S. You can do this with just about any bill you own, either yourself or by using a service like Rocket Mortgage or BillTrim.)
Be realistic about how much you can save
When it comes to saving money, setting realistic goals is essential. For example, if your current income is $2,000 a month – it's going to be tough to save $1,500+ a month.
You have to be realistic about how much you can save.
Start with a smaller goal that's easier to reach before committing to a massive, larger goal.
For example, you could start by setting a savings goal of just $200 a month. For the next month, you could increase it to $300 a month. These savings habits will compound so you can continue to save more and more until you reach your goal.
Open a High Yield Savings Account
Once you've started to save and accumulate money, where you store it becomes more and more important. For example, keeping it in a checking account that pays zero interest isn't always the best idea.
And storing it in a savings account at your local bank will probably offer less than 1% interest.
High yield savings accounts, on the other hand, now offer over 4% interest on your money (as of publication in this article in 2023.) This is free money that you don't want to miss out on. It's passive income that you don't have to work for so your money will begin to compound over time.
There are tons of different high-yield savings accounts out there, so do some research to find the best options.
Automate Your Savings
Having your savings automated will help to alleviate some of the work that comes with saving money. Instead of having to log into your bank account each week to transfer money around, see if your bank offers automatic transfers so you can have money deposited into your savings account without having to do any work.
This will make it much easier to save $20,000 in a year without having to stress and worry about constantly transferring money around.
You'll need to make sure that you have the money in your bank account when setting up an automatic transfer, but if you budget correctly this shouldn't be an issue.
My favorite money-saving app is Qapital. While it does cost a monthly subscription (I pay $3/mo), it helps me save extra for travel and special occasions by rounding up when I use my card. I love it so much and it is the only money-saving app I use, year after year. Click here to try and get $25.
Refinance Debts
If you have a large amount of debt and you're trying to figure out how to save 20000 in a year, refinancing it can be a great option to save money.
Depending on the type and size of your debt, this can potentially save you tens of thousands of dollars over the life of the loans.
It works by allowing you to extend the length of your debts in exchange for lower payments that are more affordable. Additionally, you might be able to secure a lower interest rate, which could save you even more.
Whether you have a mortgage, student loan, or a personal loan – refinancing your debts is worth exploring to help you save money without much effort.
Avoid Lifestyle Creep
Lifestyle creep can be a problem for most people. As you begin to make more money, you'll be tempted to spend more and more. Kinda like the housing thing. If you keep moving into nicer and nicer homes, you'll always be living at the top of your affordability rather than being in a position to truly save.
There are other ways this manifests. For example, if you land a new job with a nice pay increase, you might be tempted to put in a pool, go on vacation or buy a new car. And I'm not saying you shouldn't have those things.
….But this kind of behavior can slowly eat away your income until you aren't saving any money at all. You have to be careful.
If you manage to make more money, try to limit your spending so you don't spend more than 30% of your new income.
Eliminate (Unused) Recurring Expenses
Recurring expenses like gym memberships, the latest skincare treatments, music subscriptions, and streaming services can quickly add up to hundreds of dollars each month.
If you want to save $20000 in a year, cutting these out can help you reach your goal much faster.
While you don't need to cut out every expense, try to think of the ones that you don't use much or that you don't value. These can easily be eliminated from your budget and save you money each month.
Reduce Utility Bills
Between water, electric, gas, and other bills – these can add up to a few hundred dollars each month. While these living expenses are necessary, trying to cut back can be a pretty straightforward way to keep more money in your bank account.
For example, changing the temperature on your thermostat a few degrees can save you hundreds per year. You can also wash your clothes with cold water instead of hot water for an easy way to save.
Do you really need to fastest internet available? See if you can find cheaper options that might be slightly slower.
Finally, your phone bill can be a pesky couple hundred dollars a month if you aren't careful. If possible, try to avoid financing your phone and choose a plan that's less expensive.
Find Free Entertainment
There's no denying that entertainment costs have been on the rise, but there are still plenty of free entertainment options you can do to save money. It's not uncommon to spend over $50 on a trip to the movies, which can add up over the months, especially if you have a large family.
For example, going to your local park can be a great way to spend time with family that's completely free. Additionally, you'll receive the benefit of enjoying nature.
You might be able to find a free concert in your city, which can be another great option to save money.
Searching for free entertainment is one of the best ways to save money without having to cut back.
Cut out new clothes for a year
Everyone has different spending traps that can cause them to overspend when they don't plan to. For some people, it might be new clothes. For others, it might be eating out. Mine has always been clothing (although lately, I've run up quite a tab on home decor and expensive house projects.)
Every penny counts when you're trying to save $20,000 in a year – so avoiding spending money on these traps can help you reach your savings goal much quicker. Here's what happened during my own no-shopping challenge.
Switch to Generic Groceries
Food costs have been on the rise (hello, inflation), but there are plenty of ways to reduce these costs and save money. One of the easiest is to switch to generic alternatives to name-brand groceries.
In most cases, you can save at least 10%, but now in some instances, you can save over 40% on your groceries just by doing this. If you want to save even more money, try using digital coupons and cashback apps. This can save you an additional 10% or more, especially if you are aggressive with it.
Avoid Eating Out & Meal Delivery Services
Eating out is another popular spending trap that many of us overlook. While a nice meal out from time to time is nothing to be ashamed of, eating out multiple times per day can add up quickly. (Here's what happened when I skipped restaurants for a month.)
The same can be said for meal delivery services. Oftentimes these can cost much more than just going to get the food yourself, which is wasteful spending.
Instead, try to create a meal plan for each week so you can have a good idea of what you'll be eating and exactly how much it will cost you.
This doesn't mean you have to eliminate eating out completely, but you should be mindful of how often you eat out and the cost of doing so.
Try a Saving Challenge
If you need some extra motivation, starting a saving challenge can be a fun way to stay motivated on your savings journey. There are all different kinds and types of savings challenges depending on your goals. For example, a 52-week saving challenge could be a great option because that would help you reach your goal.
There's also a no-spend savings challenge (I do mine every year in February!)where you try to go as long as you can without spending any money.I f you've never done a saving challenge before, it can be a great way to help you reach your goal and save $20,000 in a year.
Sell Things You Don't Need
In our society, we accumulate things faster than we ever have. This often means clutter and other items that don't bring a ton of value to our lives.
Selling things around your home can be an easy way to get extra money without having to work for it.
This money can be sent right to your savings account so you can reach your goal even faster.
Depending on the things you have, there could be a few thousand dollars laying around your home that you didn't even know about. (Here's my guide on how to sell used clothing, and the guide for just finding regular items to declutter.)
Invest Your Money
It's easy to overlook investing when you're trying to save money. But this should still be a part of your financial plan. Investing allows you to make money while you sleep by earning passive income that grows over time.
Between the stock market, real estate, and retirement accounts – there are plenty of different options to start investing. And believe it or not, investing isn't only for the rich. Many platforms allow you to start investing with just $5 or $10, so it's available to anyone.
You want to opt for a safe investment plan that maximizes your potential earnings while limiting risk.
If you're not sure where to start, speak with a financial advisor that can help guide you through the process.
Get a Part Time Job
While nobody wants to work more, this might be a necessary step if you want to save $20,000 in a year.
There are tons of part-time jobs available so you can make more money in addition to your normal job. Some of these jobs can pay over $15 an hour, which is a great side income.
Even if you only work 5 or 10 hours a week – this can be a major benefit so you can start saving more money.
For example, if you work 10 hours a week at your part-time job and earn $15 an hour, this is an extra $150 a week or $600 per month. This will go a long way in helping you save 20 or even 30,000 in a year.
Start a Side Hustle
Frankly I am freaking proud of myself that I made it THIS FAR in an article on how to save 20000 in one year and didn't mention side hustles until we neared the end. Typically, my usual response for “how to save (x) in a year?” is to say — go earn it. Money is a renewable resource, and side hustles can be another great way to boost your income so you can save money faster.
Between starting an online side hustle to becoming a food delivery driver – these options are great ways to instantly make more money.
Another benefit of a side hustle is that in most cases, you can work whenever you want. You aren't locked into a schedule that you don't want. This can be nice because it allows you more flexibility in when you work. So if you have some extra time one week, you could make some extra cash.
The amount you can make with a side hustle will depend on numerous factors. Depending on the side hustle, you can easily make $15 an hour or more.
For example, if you have some unique skills that you can freelance, it's possible to make over $30 an hour for your time.
Cash Out Credit Card Rewards
(Ugh. I just love this one.)
If you've been using credit cards, there's a good chance you have some points or rewards that you might be able to redeem for cash. I save them up to offset the cost of the holiday season each year, but even cashing in a few hundred dollars – this can go a long way on your savings plan.
Track Your Progress
Tracking your progress is another essential step if you want to save $20,000 in a year. This can help you to stay motivated and encouraged to keep going to reach your goal.
Try to set aside time at least once per month to see if you're saving money, where you spend money the most, and identify areas of weakness that you can improve. This will help you to adjust your habits so you can make better financial decisions going forward.
How long will it take to save $20k?
The amount of time it will take you to save $20,000 will depend in many different factors. For example, if you're someone with a high income, this will make it easier and faster to save $20,000.
Because you'll have to save around $1,667 each month to reach your goal, you can work backward to see how long it can potentially take. (Like we did in this guide on how to save up a house downpayment in six months.)
For example, if you save $3,300 each month – you can cut this time in half and save $20,000 in 6 months.
The TL:DR
Saving $20000 in a year won't be easy, but it is completely possible and with the right plan you can make it happen.
By focusing on decreasing your spending while increasing your income, saving $20k in a year is an achievable goal that can help you reach financial stability. For more read how to save $1,000 in a month and our guide on how to save $5k in a fiscal quarter.
